Contemplating Europe’s Energy & Climate Future

An edited version of this article appeared in Sunday Mail on Sunday, 16th Feb., 2014.

By Constantinos Hadjistassou*, PhD

RES_oilCitizens in Europe are brought up and nourished with green energy and lower carbon emissions ideas. Virtually all emphasis from primary school energy competitions to business entrepreneurship contests revolve around “green” energy ideals. Conventional energy sources, such as coal, oil and natural gas, which currently power the world economy are sidelined in favour of other energy sources such as solar and wind which fall under the Renewable Energy Sources (RES) category. RES are painted as more environmentally benign with the potential of generating abundant new employment opportunities, boosting competitiveness and improving the standard of living and quality of life.

Reality is slightly different though. In order for citizens to form a well rounded opinion need also be aware of other side of the coin, that is, the details about conventional energy sources. Oil dominates transportation not only for its superb energy density but also for its relatively safe nature, ease of storage and comparatively modest price. In addition, coal is a much cheaper and reliable fuel than solar electricity and is predominantly used for electrical power generation.

Owing to its lower price tag and smaller carbon footprint, natural gas is primarily used as a fuel for power generation and for industrial and domestic purposes. Even though fossil fuels tax the environment through their atmospheric emissions, renewable energy cannot (yet) alone meet the world’s energy needs for several reasons. The intermittent nature of RES as well as their lower energy density in conjunction with their higher costs and unreliability, compared to conventional sources, constitute major drawbacks. Electricity grid stability is another matter which RES need address prior to their pervasive adoption.
Bias towards RES has led the EU and Member States formulate energy policies mostly in favour of photovoltaics, wind energy and biofuels. As a result, Member States have incurred considerable energy costs which became unbearable as the economic crisis cast its shadow upon the continent. Suffice only mention that Spain’s RES subsidies have generated a financial liability of some 35 billion euros. German taxpayers every year shoulder about 30 billion euros. Prompted by the higher energy costs which threaten economic recovery and competitiveness, many EU states, including Spain & Germany, have scaled down RES subsidies simply because they are economically unsustainable.

The Other Side of the “Energy Coin”
On the other side of the Atlantic, the US and Canada, because of the shale oil & gas energy boom enjoy very low energy prices in some cases four times cheaper natural gas than their EU counterparts. Despite the higher electricity bills, Europeans are against shale oil & gas extraction. Unexpectedly, hydraulic fracturing has also curbed emissions at a larger magnitude in the US (10.9%) versus 9.9% in the EU for the 2005 to 2012 eight year period. However, the sluggish economic recovery of the EU triggered an energy policy inflection point recently forcing EU energy policymakers to rethink the union’s energy priorities.

Reflecting this sentiment the European Commission’s 2030 climate and energy renewed goals, announced on Jan. 22nd, allude to implementing a 40% Greenhouse Gas (GHG) emission reduction and a renewable power share of 27% compared to 1990 levels. The caveat is that country specific binding targets have given way to European-wide quotas. Although not yet ratified, the preceding goals will probably become diluted in future negotiations casting doubts as to attaining the final outcome. It is therefore apparent that as the economic recovery of the EU remains anaemic, high energy and electricity prices will make an economic rebound more fragile.

Reconsidering EU’s Energy & Climate Future
In a prudent rethink the EU is called to strike a balance between competitiveness & unemployment and climate change & energy costs. Certainly, natural gas is more environmentally friendly than lower cost coal which is currently displaced from the US to power European power plants. Until RES become more attractive, natural gas could be used to fuel this transition. Clearly, imposing a moratorium on shale gas and oil development in European soil will not contribute towards lower energy prices. Akin to the US shale revolution, the EU ought to give its blessings to EU countries, such as Cyprus, seeking to develop their conventional energy sources. Support implies not only diplomatic statements defending Cyprus’ sovereignty against territorial neighbours but also more concrete action in terms of safeguarding European energy assets.
*Teaching Faculty, MEng Petroleum Engineering & Kios Research Center, University of Cyprus.

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